Consumer bankruptcies are generally filed under Chapter 7 or Chapter 13.  Chapter 7 bankruptcy is often referred to as liquidation or straight bankruptcy.   Chapter 13 is often called a wage-earner bankruptcy because you will make payments to the trustee over a three to five year period. 

 

In Chapter 7 a trustee is appointed to take over your property and to sell any non-exempt property for the benefit of your creditors.  In many cases, the applicable exemptions will cover most if not all of your property and there will be nothing for the trustee to sell. A typical Chapter 7 takes four to six months to complete.

 

In a Chapter 13, you get to keep all of your property but you have to pay all of your disposable income to the trustee over a period of three to five years. Disposable income is a term of art in bankruptcy law. It will depend on many factors including whether your gross income exceeds the median family income for your state.

 

 

 

 

 

Bloomington Law Group LLC helps clients who have fallen into the trap of debt. Our firm has staff that focus their efforts and attention on our Bankruptcy cases. Our attorneys and staff can answer your questions and are willing to take the time to answer all of your questions. Contact us in order to learn more about the process of Bankruptcy and how our Lawyers can assist you if you are burried in debt. 

 

If you are about to file bankruptcy in Bloomington Illinois, you will need an attorney to guide you through to a safe discharge. The subjects discussed below will provide you with some basic information to help you understand the bankruptcy process in Bloomington Illinois.



As you explore the following subjects, you may have questions about your particular situation. Feel free to contact us at (309) 319-6206 to schedule a free consultation, or Email us with your question.

 

 

 

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• The Bankruptcy Code

• Automatic Stay

• Helpful Definitions

• Chapter 13 Bankruptcies in Bloomington Illinois

 

 

 

 

In a Chapter 13 Bankruptcy, the debtor proposes a plan to repay creditors. The Court reviews the Chapter 13 plan and will approve it if the plan can work and meets the requirements of the bankruptcy laws. Payments are made to the Chapter 13 trustee, who pays the creditors according to the plan. The debtor can keep some property that would be lost in a Chapter 7 bankruptcy.

 

Chapter 13 requirements

You must pay your creditors in full if you can. If that is not possible, you must pay all of your disposable income (the income left user her paying your necessary living expenses) for 3-5 years. Once the plan is completed you will get a discharge of debts. You must pay certain back taxes, and any obligations in child support and alimony in full during the plan.

 

Warnings about Chapter 13

Because a Chapter 13 plan requires the debtor to catch up on certain debts over the life of the plan, to succeed in a Chapter 13 a debtor usually needs either to have more income than when he fell behind on his debts or to live on a very tight budget over the life of the plan – or both.Many Chapter 13 plans fail. If the debtor misses payments under the plan, the bankruptcy trustee will ask the court to end the plan. When this happens, the debtor also loses the protection of the bankruptcy and all original debts are reinstated.

 

What a Chapter 13 Bankruptcy Cannot Do

There are certain things Chapter 13 bankruptcy cannot do, such as:

• Release the debtor from non-dischargeable debts;

• Eliminate a security interest, such as a mortgage;

• Discharge debts that are incurred after the bankruptcy is filed;

• Allow the debtor to keep a house or car without paying;

• Allow the debtor to discharge debts the court decides he can afford to pay.

 

Debts that cannot be discharged in a Chapter 13 include:

• Alimony

• Child support

• Criminal fines and restitution

• Damages to individuals caused by drunk driving or intentional torts

• Money owed due to fraud, theft or embezzlement

• Most taxes and long term debts, such as mortgages

• Student loans are not discharged unless denying a discharge would cause an undue hardship to the debtor.

 

 

 

 

Chapter 13 versus Chapter 7

 

Repayment

In a Chapter 13, the debtor attempts to repay the creditor(s) rather than to wipe out his/her claims with no payment. Generally, a secured creditor is entitled to payments totaling 100% of the present value of the secured property. Unsecured creditors may receive 100% of payment (or less) depending upon the debtor’s income.This may allow you to keep property that is secured by a lien by paying for it through the Chapter 13 plan. This can save a home from foreclosure or stop repossession of a car. A Chapter 13 plan may also stop evictions, if filed before the 5 day notice or other lease termination and if you can pay the back rent owed through the Chapter 13 plan.

 

Exemptions

Unlike the exemptions allowed to the debtor in a Chapter 7, there are no limits as to what a debtor can keep in a Chapter 13. However, a creditor cannot receive less in a Chapter 13 than they would have received from the sale of non-exempt assets in a Chapter 7.

 

Payment Plan

In a Chapter 13, the debtor must propose a payment plan to the court. Payments under this plan are made to the Trustee (who charges 10% of all funds collected as his/her fee). The Trustee then goes on to distribute the money to the creditors.

 

In order to present a plan, the debtor must first show the court that they are able to meet their ordinary monthly living expenses (such as rent, food, clothing, utilities, transportation costs, etc) out of their monthly income. It makes no difference what the source of income is, as long as it is stable and regular. The debtor must then still have sufficient funds left over to make payments on their proposed plan to pay off debts owed.If you cannot repay all of your debts, but have made the best effort to pay what you can, you can get a discharge of the balance left on your debts, although you cannot remove a lien unless you have paid it off through the plan.

 

Time Restrictions

A Chapter 13 plan is required to go on for 36-60 months (3-5 years), depending on the debtor's income. If the debtor's income is above the state median income, it must go on for 5 years. If the debtor's income is below the state median income, it must go on for 3 years. The Chapter 13 plan can only end before the required amount of time if all claims are paid in full.

 

Conditions for Court Approval

Chapter 13 plans will not be approved by the court and a debtors discharge will not be granted unless the debtor is up-to-date in child support obligations (which come due after the bankruptcy is filed).

 

NOTE: A bankruptcy can be dismissed, or a Chapter 13 can be converted to a Chapter 7 if the debtor is not current with child support obligations.

 

 

 

 

 

 

 

 

 

 

 

 

Helpful Bankruptcy Links

Here are some helpful links if you are going through a Bankruptcy in the Bloomington Illinois Area:

 

• U.S. Trustee Program

• Central District Court of Illinois

• United State Bankruptcy Code

 

 

 

 

 

 

Helpful Bankruptcy Forms

Here are some Forms that you may find helpful if you are going through a Bankruptcy in the Bloomington Illinois Area:

 

• Bloomington Law Group LLC Intake Form (bring to your first meeting with us)